The number of people living in poverty in a
developing nation can be drastically lowered through education. Multinational
corporations (MNCs) seek out educated populations to supply jobs at a
substantially lower cost than are available in the United States. To ensure
that there is no exploitation of the people in the developing country: 1) MNCs
must engage developing countries using constructive engagement to further social
development; and 2) the government must ensure the protection of basic human
rights for the employees in those counties through regulation; and 3) MNCs must
be prepared to pay wages that are higher than the national poverty line when
unemployment is low and the people are sufficiently educated.

How to engage

Once the choice has been made that engaging
with a developing country is beneficial to the stakeholders of a MNC, the
company must determine how to enter that marketplace. John Schermerhorn, Jr.
defined ways to engage developing countries. They are sanctioned nonengagement,
principled nonengagement, constructive engagement, or unrestricted engagement.

The strict practices of nonengagement do not
allow for social development in a developing nation and therefore are not
permissible options. Sanctioned nonengagement is when the United States
government or marketplace force companies not to do business in the host
country. Principled nonengagement occurs when companies choose not to do
business in the country. These nonengagement practices are chosen when the
practices in the host country do not align with the core values in the United
States.

Sanctioned nonengagement by the government can
hurt foreign relations between the two governments if it is not done carefully.
The United States government must negotiate with the host country before
enacting sanctions. If foreign relations are hurt, it may cause the foreign
government to sell all of its United States bonds and therefore negatively
impacts the United States economy. This negatively impacts the United States
economy because bond rates are tied to the financial cash flow of the nation and
its economy. The United States government can avoid losing financial support of
the developing nation by demanding that these basic human rights are provided
only for the employees and suppliers of MNCs.

Constructive engagement allows host countries
to improve all of their human rights conditions over time and is therefore the
proper way for the MNC to engage. This has worked with the Sullivan Principles,
which provided guidelines such as equal opportunity, respect for voluntary
freedom, a living wage, and to provide a safe workplace, when dealing with
Apartheid in South Africa. For constructive engagement to work, standards must
be set similar to the Sullivan Principles, and an independent auditing firm must
ensure that progress towards these principles are being accomplished. Immediate
minimum standards of employee’s “basic human rights” must be enforced to ensure
that these rights are not limited.

Government Regulation

Constructive engagement is not designed to
guarantee that there are no violations of the employees’ “basic human rights”.
Constructive Development is designed to ensure that progress is made towards
social development. There must be exploitive labor practices that are made
illegal. I propose that the United States enacts regulation that would stop any
MNC from having a supplier or employee in a developing nation that did not have
its “basic human rights” protected. Since a majority of MNCs will lean towards
unrestricted engagement if there is no governmental regulation, regulation is
necessary.

These “basic human rights” include the
employees’ ability right to work no more than sixty hours per week. This may
seem high, but many poor people are willing to work this much to earn enough
money to survive. These “basic human rights” also include a reasonable number
of sick days, holiday days, medical leave, unionization, and bathroom and lunch
breaks. Some rights that we see as basic, such as no children working, can not
be a luxury embraced by the people in the developing nation if this income is
needed for the family to survive. This luxury should be encouraged however
since higher level education lead to higher paying jobs.

Enforcing these “basic human rights” may appear
as ethical imperialism, which is when a foreign country imposes its ethics onto
the host country by force or coercion. These human rights should not fall under
the category of ethical imperialism because they must be respected regardless of
where these employees are. These rights have been universally adopted
throughout recent civilized history. These rights could be seen as rights that
not all humans should be given. This mode of reasoning is quite problematic
considering that any government acknowledges the importance of human dignity,
even if it isn’t currently being respected.

Regulation is necessary because foreign
governments have drastically lowered safety conditions and wages to make their
countries attractive to MNCs. They do this so that the employment costs are
competitive with other developing nations that are using the same human rights
deregulation practices. This competition for lowering human rights is leading
to a constant downward spiral of human rights in developing countries. Any
violations of the “basic human rights” must not be allowed for MNCs that do
business in developing nations.

It has been argued that government intervention
into business is negative because the free market should control itself. This
argument is invalid if you look at the conclusion that people’s “basic human
rights” are not being respected. The beneficiaries of this exploitation are the
MNC, the host country’s government, or the consumers of the MNCs. It is morally
unfair to use people only as means. If you are providing jobs that are not
exploitive, then you are not using these people only as means. People have
argued that creating laws to enforce ethics promotes a sort of relativism
whereby the MNCs will only look to laws to supply their ethical guidance. This
argument is not strong enough to justify the negative impacts of unrestricted
engagement. It remains that government regulation is necessary to avoid
exploitation of employees of MNCs in developing nations.

Government regulation and constructive
engagement are two ways to ensure that employee’s “basic human rights” are
protected. Once these standards and wage considerations have been made, MNCs
can feel ethically confident in their decision to enter the marketplaces of
developing nations.

Proper wages

Government regulation and constructive
engagement are not enough to ensure that MNCs have met their ethnical
obligations. MNCs must also be committed to paying wages that are well above
the poverty line for educated employees if unemployment is low.

Providing skilled labor jobs has a positive
side effect of helping to end poverty in a developing nation. This is a
justification for entering the marketplace by a MNC. Poverty is decreased
because the availability of higher paying jobs will increase the wage of the
lower paying jobs. This happens because there will be less people available for
these lower paying jobs. If less people are available for lower paying jobs,
wages will have to increase. The result would be higher wages for everyone in
the society.

Many ethical debates have occurred over the
wages paid to employees in developing nations. The solution to this complex
problem is to pay people according to their education and skill level, and the
unemployment level. Someone who is educated and trained must receive a wage
that is well above the poverty line if unemployment is below ten percent.

It is not the ethical responsibility of a MNC
to pay wages at the level of home based standards, which are wages equal to what
an employee would earn in the host country. This is not necessary because there
needs to be incentives for seeking employees in developing nations. It is also
not the ethical responsibility of the MNC to hire people at a wage that is
higher than the average wage of that region. The wage must be at least equal to
the minimum wage set by local laws. To ensure that there is no exploitation,
people need to be paid a wage that is fair based on current unemployment rates
and that person’s education and training.

A well known argument is that raising the
minimum wage will have a negative impact on the economy. The negative impact
they argue will occur is that with higher wages, hiring will be less attractive,
and unemployment will rise. However, historical evidence in the Unites States
shows that minimum wage increases do not have negative impacts on the economy if
done slowly.

MNCs must be committed to paying wages that are
above the poverty line if unemployment is low. Developing nations rely on the
world economy to survive when they shift their focus from agricultural
production to industrial production. In Jamaica, during the years of 1977-2000,
less than 5% of all foreign investment actual remained within the country. This
startling fact makes it obvious that these developing countries become
increasingly dependent on producing for the world economy. The trend for
workers in developing countries is to move away from agricultural independence
and to move towards industrial based companies, including MNCs. MNCs have
recently been pulling out of Jamaica because of cheaper labor that can be found
in South America because of NAFTA.

The practice of leaving to find cheaper labor
can have negative impacts greater than if the MNC had never entered that
country. When MNCs pull out of a country, they leave behind more unemployed
than when they went into that country. This negative impact occurs because the
old agricultural industries are sometimes permanently depressed when people stop
attending to these agricultural industries for a period of time. If MNCs are
committed to paying educated people wages that are well above the poverty line
when unemployment lowers, then they have met one their ethical obligations for
doing business in a developing nation.

The highly educated and trained

Education is a contingency for paying employees
a wage that is well above the poverty line. If people in a developing nation do
not take the energy and time to become educated, then they can not blame the MNC
if they are not being paid a living wage. It is the responsibility of a
developing nation to offer enough education opportunities to its people so that
the society can provide skilled labor for the world market.

MNCs will utilize educated people in developing
nations because they are available at a substantially lower cost than is
available in the United States. The level of education necessary to attract
higher paying jobs that will uplift a society out of poverty is between ten and
twenty years of school. Highly educated and trained people can be defined as
people, who attend the university, are provided job training and experience, and
become fluent in English speaking and conversation skills.

The need for higher education is apparent from
the example of the people in Sri Lanka. The unemployment rate in 2002 was 8.8%,
and simultaneously the number of people living in poverty was 22.7%. This low
unemployment rate and high poverty rates occur in conjunction with each other
because less than 3.4% of the population who enter the school system are going
into universities. With more people entering the Universities, such as 23% in
America, overall wages for all people will rise when educated people enter the
job market.

There needs to be an emphasis by the government
to build more universities to ensure that more people can join the
universities. This is important because in Sri Lanka it is virtually impossible
for most locals, especially the poor, to attend a university in their lifetime.
To ensure employment after leaving the university, the university should ensure
that students will become fluent in English, have substantial training in their
desired occupation, and have real world work experience. The level of education
in the schools must be high enough so that MNCs will be enticed to bring their
jobs to that country.

The main evidence to support the need for
higher education comes from the examples of Europe and other Westernized
countries where higher education has been widely available for a long time.
These countries, on average, live in lower levels of poverty and are able to
perform highly skilled jobs that pay a higher wage. The availability of
statistics that supports these claims are extensive. Countries that have a more
educated society lead the path in technology. They will find creative ways to
create jobs themselves and to encourage foreigners to use them for the supply of
higher wage jobs. In America, the number of households under the poverty level
was 10% in 2003. The unemployment rate was 6% in 2003. Total enrollment into
the education system was 70 million in 2003 with 16 million entering
universities, or roughly 23%. This strongly supports the thesis that higher
education leads to a society with lower poverty levels.

Conclusion

It is the ethical obligation of MNCs to pay
educated employees wages that are well above the poverty time. To fulfill all
of their ethical obligations, MNCs must also engage using constructive
engagement and embrace government regulation that will protect employees “basic
human rights”. These obligations must be considered by a MNC before deciding to
enter a developing country. It is the responsibility of MNCs to consider
developing countries for their labor supply, because if executed properly, it
will create more stockholder value. While performing the responsibility of the
MNCs to make money for its stockholders, these ethical obligations can’t be
overlooked simply to make a higher profit.